Livestock Analysis | July 28, 2022
Price action: August lean hogs rose 52.5 cents to $119.125, the contract’s highest closing price since April 19. October hogs closed 12.5 cents lower at $96.325.
Fundamental analysis: August hogs extended a nearly two-week rally as cash fundamentals remained firm and traders narrowed futures’ gap to the CME lean hog index. The CME lean hog index rose 25 cents to $119.73 (as of July 26), a 13-month high, leaving August futures at a discount of 60.5 cents at today’s close. Cash hog prices have surged this week with buyers actively competing for supplies, which may keep the benchmark index on an upward path. Wholesale market strength also supported futures, signaling solid pork demand despite concerns over recession. Pork cutout values rose $2.16 early today to $128.95, as a gain of nearly $12 in bellies helped send the wholesale gauge to a 12-month high. Movement by midday was relatively light at 89.5 loads.
Also today, USDA reported net weekly U.S. pork sales of 21,600 MT for 2022, up 5% from the previous week but down 16% from the prior four-week average. Mexico was the primary buyer. Exports of 27,000 MT were up 1% from the previous week and down 2% from the previous four-week average, with Mexico being the primary destination, followed by China.
Technical analysis: Bulls remain in control, with the August contract continuing its climb. Most-active October eased by today’s close after rising to $97.875 earlier. Both the August and October contracts remain well above their 20-day and 40-day moving averages. August futures are poised to continue their trek higher, as bulls aspire to reach the March 31 high of $123.00, however, support levels remain at $117.80 and then at 117.00, should a reversal transpire. October futures will likely seek the same path, but will first encounter resistance at $97.32, which was tested in today’s session, and face second resistance at $98.18. Support stands at $94.79 and $93.13, respectively.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
Price action: August live cattle fell 62.5 cents to $136.175, while October live cattle fell 50 cents to $141.825. August feeders fell $1.675 to $177.425.
Fundamental analysis: Cattle futures fell a third consecutive session amid expectations for continued erosion in cash prices. Cash cattle trade started around $135 at mid-week in the Southern Plains and $225 in the Nebraska dressed market, down around $1 and $2, respectively, compared with last week. Those numbers likely portend a fourth straight weekly decline in the average live steer price, which was $141.12 last week. Wholesale beef prices extended a mostly sideways trend during the second half month, though daily movement has been decent, suggesting retail demand is holding up. Choice cutout values fell 42 cents early today to $267.57 on midday movement of 48 loads.
USDA reported net weekly U.S. beef sales at 25,300 MT, a 6% increase week-over-week and a 66% increase from the four-week average. Top buyers were South Korea and Japan. Beef shipments were also reported to be 20,300 MT, mostly to South Korea and Japan.
Technical analysis: August live cattle traded a $1.15 range, testing support at $136.4 and $136.00, confirming a near term sideways to lower trend. Resistance at $137.225 and $137.65 was unscathed in today’s session as bears led futures lower. The gap from April 25 remains a target for bulls.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
